Extending the potential of Baumol’s entrepreneurial allocation theory

Abstract

Purpose The underlying assumptions of Baumol’s theory of entrepreneurial allocation limits its potential to answer some key questions related to the entrepreneurship allocation. Hence, this paper aims to highlight the inherent limits of Baumol’s theory and suggest a new approach for understanding the entrepreneur-institution relationship and their functions. Design/methodology/approach This is a conceptual paper with a narrow focus on the literature. Findings The paper argues that Baumol’s adherence to neoclassic economics assumptions about entrepreneur and institution, such as entrepreneurs as rational choice taker with predetermined goals or institutions as exogenous, limits the potential of his theoretical framework to explain productive entrepreneurship in weak institutional settings. As such, underlying on Austrian economics assumptions about entrepreneur and his/her agency, this paper proposes a reconceptualization of productive entrepreneurship as an outcome of the interaction between entrepreneur and context. Practical implications Going beyond Baumol’s main proposition of one-sided influence of institutions on entrepreneurship allocation, this research highlights the influence of individual factors and entrepreneurial action on choosing entrepreneurial paths by entrepreneurs. So, future policies to stimulate productive entrepreneurship should consider these factors and go beyond Baumol’s mere focus on institutional improvement. Originality/value Going beyond one-sided influence of institutions on entrepreneurship allocation, this paper suggests an interaction centric approach which considers the role of actors and institutions as the co-creator of each other in the social process and argues that any effort for explaining the entrepreneurship should consider the co-creative nature of the actors and institutions as well as the endogenous nature of institutions. The proposed approach will help expanding entrepreneurship literature through finding answers to some key under-examined questions in the promising research stream of entrepreneurship allocation.

The standalone and resource-bundling effects of government and nongovernment institutional support on early internationalizing firms’ performance

“…In developing economies, government is the major source of institutional support to help firms build their export competitiveness (Charoensukmongkol, 2016;Njinyah, 2018). Nevertheless, as the government institutions in these countries are typically inefficient and bureaucratic (Aeeni et al, 2019;Krammer et al, 2018;Manolopoulos et al, 2018), assistance by nongovernment institutions might play an important role in firms' early internationalization.…”

“…In developing economies, the government is the major source of institutional support to help firms build their export competitiveness (Charoensukmongkol, 2016; Njinyah, 2018). Nevertheless, as the government institutions in these countries are typically inefficient and bureaucratic (Aeeni et al , 2019; Krammer et al , 2018; Manolopoulos et al , 2018), assistance by nongovernment institutions might play an important role in firms’ early internationalization. Institutions incorporating government agencies, nongovernment organizations, not-for-profit organizations and business firms possess heterogenous resources important to export involvement and activities (Awuah and Amal, 2011).…”

Innovation affecting growth aspirations of early stage entrepreneurs: culture and economic freedom matter

“…Borrowing from the fields of economics, marketing and strategy, we explained that increased innovation can lead to increased growth ambitions and proposed that the effect of innovation on shaping the growth ambitions of the entrepreneurs is contingent on the institutional factors moderating this relationship. However, the effect of innovation in shaping growth ambitions can be limited or strengthened conditioned to the absence or presence of productive or efficient institutions (Aeeni et al , 2019). In the case of low economic freedom (or low presence of market economy in a society), there are some degrees of uncertainty associated with the returns on innovation (Griffiths et al , 2012).…”

Innovation and growth ambition of female entrepreneurs: a comparison between the MENA region and the rest of the world

“…The growth expectation seems to vary significantly, depending on the socioeconomic context in which entrepreneurs run their business. Different contexts may be indicative of different structures of entrepreneurship drivers and barriers (Aeeni et al, 2019). In the MENA region, the rate of the participation of women in entrepreneurship is not only lower than male counterparts but also lower than female entrepreneurs in the rest of the world (Bahramitash and Esfahani, 2016).…”

“…The high level of corruption, weak intellectual property system, and weak legal system are more evident in under-developed contexts such as the MENA region, as compared with other regions. In other words, these regulatory institutions are not efficient enough to promote productive entrepreneurship (Aeeni et al, 2019). Moving to the third level of the Williamsons' (2000) hierarchy, there is the governance level in which, the governance of contractual relations becomes the focus of analysis and determines the way that individuals interact.…”